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10 June, 14:44

The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tune-up is given below:

Job Standard Hours Standard Rate Standard Cost

Motor tune-up 1.50 $6.20 $9.30

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 230 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance $900 F

Labor spending variance $249 F

Required:

1. Determine the number of actual labor-hours spent on tune-ups during the week.

2. Determine the actual hourly rate of pay for tune-ups last week.

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Answers (1)
  1. 10 June, 16:09
    0
    Actual Hours Worked = 106.5

    Actual Rate = $14.6

    Explanation:

    Labor Spending Variance = Labor Efficiency Variance Labor Rate Variance

    249 = Labor Efficiency Variance 900

    Labor Efficiency Variance = 249-900 = (651)

    Labor Efficiency variance = Actual Hours Worked * Standard Rate-Standard Hours Worked * Standard Rate

    $651 = Actual Hours Worked * $6.20-1.50 * $6.20

    $651 = Actual Hours Worked * $6.20 - 9.3

    651+9.3 / 6.2 = Actual Hours Worked

    Actual Hours Worked = 106.5

    Labor Rate Variance = Actual Hours Worked * Actual Rate - Actual Hours Worked * Standard Rate

    $900 F = 106.5 * Actual Rate - 106.5 * $6.20

    900 + 660.3 / 106.5=Actual Rate

    Actual Rate = $14.6
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